Securing Retirement Success for Women

This analyst blog is part of our coverage of the 2016 Morningstar Investment Conference.

Presentation slides from the panel can be viewed here.

In a panel session moderated by Morningstar's Laura Lutton, Cindy Hounsell, president of the Women's Institute for a Secure Retirement, and Mark Miller, a retirement columnist for Morningstar, Reuters and WealthManagement.com, discussed the hurdles women face when saving for retirement and how advisors can potentially help their female clients tackle such issues.

Miller said the widely debated issue of gender income inequality ultimately results in a retirement gap for women. As women earn less on the dollar compared with men, they logically lose out on income which they can use during their retirement years. The panel referenced a study conducted by the National Women's Law Center that showed this loss of lifetime income for a woman who works full time over a 40-year period exceeds $430,000. Miller noted that in order to make up for this loss of income, a typical woman needs to work a staggering 11 years longer than a comparable man.

Hounsell's nonprofit organization works to help women and other stakeholders understand issues surrounding women's retirement income. Hounsell says her organization's mantra is to recognize that many women simply do not know the basics of retirement saving. She explained how women often do not take part in important conversations their spouses have with their financial advisor. This lack of participation leaves women uneducated and unaware of their financial situation, which is especially concerning as women tend to outlive their male partners. A woman's longer life expectancy not only requires her to save more for retirement but can also leave her in charge of making financial decisions she was once not involved in. Both Hounsell and Miller encouraged advisors to include both husband and wife in their financial planning meetings. This practice could prove to be beneficial for advisors from a client-retention perspective as well, as Miller noted that an overwhelming percentage of women end up firing their financial advisors once their spouse passes away.

In terms of where advisors should begin in preparing their clients for retirement, Miller stated that a client's social security should be top of mind. He noted there are advantages in coordinating a couple's social security benefits together rather than looking at each individual's benefits in isolation. Miller also opposed the argument of women needing to take on more risk to achieve retirement success. Although women tend to be conservative investors relative to men, Miller argued this does not automatically mean they need to increase their risk appetite, but rather perhaps increase their savings or, as Lutton pointed out, perhaps be more conscious of the fees they pay on their investments.

In a study conducted by MetLife in 2011, retirees were asked about the costs of major unexpected expenses. The data shows that retirees can experience significant unexpected expenses from various sources. Hounsell said advisors and retirees can be better prepared for such unexpected costs by being more aware of community resources which are available to them.

Despite the obstacles women may face in achieving retirement success, there have been some positive changes in recent years. For instance, a study conducting by Vanguard has shown increased participation by women in workplace pension plans. Furthermore, in reference to the same study, Miller said women with incomes below $100,000 are saving more than men despite earning less. Lastly, as women stay in the workforce longer, they inevitably increase their retirement readiness and address the reality of living longer and the unfortunate fact of earning less compared with men. Nonetheless, there is still much progress to be made when it comes to women achieving retirement success, and we heard both panelists mention that such progress can be made through changes in policy and regulation but also through actively educating and involving women in the financial planning conversation.